With the explosive growth in open networks such as the Internet over the past several years, and the rapid increase in the number of consumers with access to the World Wide Web, there has been a great deal of interest in the development of electronic commerce on the Internet.
A variety of service providers have introduced payment schemes to support the purchase of goods or services on-line in a virtual merchant environment. These schemes have used a variety of approaches with varying degrees of security and protection of payment information as it is transmitted across the Internet. These approaches have used several models based on traditional payment methods existing in the face-to-face retail market, including credit/debit cards, checks and cash. However, for a variety of reasons, various of these numerous schemes have particular drawbacks.
Currently, a consumer may use his or her traditional credit or debit card to make a purchase over the Internet. A consumer simply supplies his card account number which is then transmitted across the Internet to a merchant and the payment transaction is completed in the traditional manner for a credit card. Often, these account numbers are transmitted over the Internet with extremely limited or no security. Security can be improved through use of the "Secure Electronic Transaction" protocol published by Visa International and Mastercard in 1996. These transactions still require some form of card validation and performance of a balance check. These checks are performed on-line between the merchant, an acquirer and an issuing bank, a process which can become time consuming and inefficient when the value of the transaction is low, or when a number of small value transactions will be taking place in a short time span.
Other service providers are establishing Internet payment systems based upon an electronic check model. For example, the Financial Services Technology Consortium, a non-profit membership organization that includes financial services providers, universities, industrial partners, and government agencies, initiated an Internet electronic check product in June, 1995. The electronic check is modeled on the paper check, but is initiated electronically using digital signature and public cryptography. Deposits are gathered by banks via electronic mail and cleared through existing channels such as the Automated Clearing House (ACH). However, use of such an electronic check by a consumer has various drawbacks. For one, digital signatures and public encryption necessitate use of a certifying authority adding additional entities and "net" trips to the transaction. Also, cardholder registration is needed.
Other providers of Internet check-based services include NetCheque at USC, NetChex operated by Net1 in Phoenix, OnLine Check Systems in Denver, and RediCheck in Salt Lake City which all provide on-line services to merchants and consumers based on submission of bank drafts.
Other Internet payment alternatives are modeled on cash transactions and include a variety of schemes. A credit card purchase can also be made using CyberCash, in which the consumer appends his credit card number to an electronic invoice received from the merchant, returns the credit card number to the merchant which is then processed and forwarded on to CyberCash where it is then treated like a normal credit card transaction. However, this technique suffers from some of the disadvantages discussed above with respect to traditional credit card transaction on the Internet. Also, this technique requires additional work by the merchant in processing the credit card number. Debit transactions may also be completed in which a consumer receives prefunded coins in an "electronic wallet", but require a consumer to open a CyberCash account in advance. Such a scheme requires a consumer to establish ahead of time a relationship between the consumer's bank and CyberCash and to pre-fund the cyber coins. One drawback to this scheme implemented by CyberCash is a minimum purchase price of 25 cents.
A digital, token-based system for Internet transactions has been implemented by DigiCash. With DigiCash, so-called "digital coins" are purchased from DigiCash from a prefunded deposit account and stored on the consumer's hard drive. These digital coins are then used for an Internet transaction with a merchant. For example, to use DigiCash, the consumer sends money to a bank through a credit card or automated teller transaction, and the bank sends the consumer an equivalent amount of cash in the form of digital coins as an encrypted electronic mail message containing a list of 64-bit numbers. Each number corresponds to a specified amount of money, which is recorded by the issuing bank. For instance, if a consumer sends a bank $10.00, the consumer receives an encrypted electronic mail message containing a 64-bit number that is worth the equivalent of $10.00. To purchase something of value on the Internet from a merchant, the consumer sends the merchant the number, the merchant forwards the number to the bank, and the bank credits the merchant account for the $10.00. This scheme has disadvantages in that the consumer must first set up a relationship with DigiCash and use a credit card or similar instrument to purchase these digital coins, which then must be downloaded to the consumer's computer. This transaction can be time consuming for the consumer and is subject to fraud. In addition, a merchant must be set up to not only accept these digital coins, but also to verify their authenticity, to confirm the transaction, and then finally to forward these numbers on to his bank in order to finally get paid. One drawback from the merchant's point of view is that much of the transaction work must be performed by the merchant. In other words, the merchant must keep track of these digital coins and later submit them to either DigiCash or to a bank to get paid.
Another scheme for completing an Internet transaction is offered by First Virtual Holding, Inc. First Virtual offers a software solution based upon a unique identification number and electronic mail confirmation. To use this scheme, a consumer opens a special account with First Virtual and then receives a confidential identification number. When the consumer wishes to purchase a product or service over the Internet, he or she sends an electronic mail message containing the confidential identification number to the merchant. The merchant then sends the number to First Virtual by electronic mail for verification and identification of the customer. First Virtual then confirms with the consumer by electronic mail that the consumer did indeed initiate the transaction and wishes to make the purchase. There are drawbacks to this scheme in that the consumer must first open a special account with First Virtual. Also, the merchant must communicate with First Virtual to identify the customer and to identify the customer's credit card account number that is identified by the confidential identification number. Once the customer's credit card account number has been identified, payment to the merchant occurs in a manner similar to a traditional credit card transaction. Also, there is a minimum of 50 cents and time delays can be long.
Aside from payment schemes over the Internet, a technique in use for performing a financial transaction at a stand-alone terminal uses a smart card. A smart card is typically a credit card-sized plastic card that includes a semiconductor chip for holding the digital equivalent of cash directly, instead of pointing to an account or providing credits. When a card of this kind is used to make a purchase, the digital equivalent of cash is transferred to the merchant's "cash register" and then to a financial institution. Stored-value cards are either replenishable (value can be reloaded onto the card using a terminal) or non-replenishable (the card is decremented in value for each transaction and thrown away when all its value is gone).
Physically, a smart card often resembles a traditional "credit" card having one or more semiconductor devices attached to a module embedded in the card, providing contacts to the outside world. The card can interface with a point-of-sale terminal, an ATM, or a card reader integrated into a telephone, a computer, a vending machine, or any other appliance. A microcontroller semiconductor device embedded in "processor" smart card allows the card to undertake a range of computational operations, protected storage, encryption and decision making. Such a microcontroller typically includes a microprocessor, memory, and other functional hardware elements. Various types of cards are described in "The Advanced Card Report: Smart Card Primer", Kenneth R. Ayer and Joseph F. Schuler, The Schuler Consultancy, 1993, which is hereby incorporated by reference.
One example of a smart card implemented as a processor card is illustrated in FIG. 1. Of course, a smart card may be implemented in many ways, and need not necessarily include a microprocessor or other features. The smart card may be programmed with various types of functionality, such as a stored-value application; credit/debit; loyalty programs, etc. For the purpose of this disclosure, card 5 is programmed at least with a stored-value application, and will be referred to as "stored-value" card 5.
Stored-value card 5 has an embedded microcontroller 10 that includes a microprocessor 12, random access memory (RAM) 14, read-only memory (ROM) 16, non-volatile memory 18, an encryption module 22, and a card reader interface 24. Other features of the microcontroller may be present but are not shown, such as a clock, a random number generator, interrupt control, control logic, a charge pump, power connections, and interface contacts that allow the card to communicate with the outside world.
Microprocessor 12 is any suitable central processing unit for executing commands and controlling the device. RAM 14 serves as storage for calculated results and as stack memory. ROM 16 stores the operating system, fixed data, standard routines, and look up tables. Non-volatile memory 18 (such as EPROM or EEPROM) serves to store information that must not be lost when the card is disconnected from a power source but that must also be alterable to accommodate data specific to individual cards or any changes possible over the card lifetime. This information might include a card identification number, a personal identification number, authorization levels, cash balances, credit limits, etc. Encryption module 22 is an optional hardware module used for performing a variety of encryption algorithms. Card reader interface 24 includes the software and hardware necessary for communication with the outside world. A wide variety of interfaces are possible. By way of example, interface 24 may provide a contact interface, a close-coupled interface, a remote-coupled interface, or a variety of other interfaces. With a contact interface, signals from the microcontroller are routed to a number of metal contacts on the outside of the card which come in physical contact with similar contacts of a card reader device.
One possible use of a stored-value card by a consumer is illustrated in FIG. 2. FIG. 2 illustrates a block diagram of a customer operated service payment terminal 50. A customer typically uses such a service payment terminal in a face-to-face environment in order to purchase goods in a store or directly from the terminal itself. Service payment terminal 50 can be an attended device or it can be integrated into a self-service device such as a vending machine or public telephone. For example, the service payment terminal may be incorporated into a soda machine in order to dispense sodas to a customer in which the customer pays by inserting the stored-value card. Or, the service payment terminal may be a point-of-sale terminal such as is found at a check-out counter where a customer inserts his stored-value card in order to purchase goods.
Service payment terminal 50 includes a router 51, a user interface 52, a card handler/reader 54, a security card handler 56, a security card 58, a terminal application 60, a data store 64 and a concentration point handler 66. Router 51 is hardware and software for routing information between functional blocks. User interface 52 controls the status of displays on the terminal and supplies instructions to the user. For example, the user interface provides instructions relating to insertion of stored-value card 5 or security card 58. Also, the user interface provides instructions and/or buttons for the customer to interact with terminal application 60 in order to purchase goods and/or services. Card handler 54 provides a physical card reader and associated software for accepting and communicating with stored-value card 5. Similarly, security card handler 56 provides a card reader and associated software for communicating with security card 58. In conjunction with security card handler 56, security card 58 controls the command sequence of the terminal and provides transaction and a batch security.
Terminal application 60 receives commands and information about the transaction and initiates the actual purchase. In addition, terminal application 60 is responsible for all application specific functionality such as guiding the customer through the use of the terminal via a display, and for providing all hardware and software needed to provide the user with a good and/or service once it has been informed by the security card that an appropriate value has been deducted from the stored-value card.
Data store 64 controls the storage of purchase transactions and totals. Concentration point handler 66 controls the sending and receiving of information to and from a concentration point. Concentration point 68 is a staging computer that communicates with any number of service payment terminals to collect batches of transactions. The concentration point then sends these transaction batches to a clearing and administration system for processing (such as in FIG. 3). Once processed, batch acknowledgments, along with other system updates are sent to the terminals via the concentration point. The concentration point ensures a successful transfer of data between service payment terminals and the clearing and administration system, and prevents overloading of the clearing and administration system. The service provider contracts with a concentration point for collection of the service payments. The concentration point may also be an existing central facility such as a telephone company that collects its own payments from card telephones.
Such a service payment terminal 50 allows a customer to use a stored-value card for the payment of goods and/or services, generates a payment result from a transaction, and bundles individual payment results into a collection for transfer to a clearing and administration system, which then transfers funds that had been debited from a customer's stored-value card to the merchant whose goods and/or services had been purchased from the terminal.
FIG. 3 illustrates an environment 100 useful for issuing stored-value cards and reconciling transactions performed with such a card. A terminal supplier 102 builds the equipment used by a service provider 104 to provide goods and/or services to customers having a stored-value card at a service payment terminal 50. Card Supplier 106 contracts with an integrated circuit manufacturer and a card manufacturer for integrated circuits and plastic card bodies, then embeds the integrated circuits into the cards and initializes them with a serial number. It then delivers the cards to card issuer 108. In conjunction with clearing and administration system 110 (such as a system provided by Visa International of Foster City, Calif.), card issuer 108 personalizes new cards and then transfers these cards to individuals (cardholders 112). The cardholder may then charge the card with value prior to use. Alternatively, the card may come with value already loaded. The cardholder 112 may then use the card at a service payment terminal 50 to purchase goods and/or services from service provider 104. Terminal 50 then debits the value from the card, thus creating a service payment.
Periodically, all transactions are sent in a data file from terminal 50 via concentration point 68 and an acquirer 114 to clearing and batch administration system 110 along with accumulated service payment batches from other terminals. Based upon this collection data, clearing and administration system 110 then receives money from card issuer 108 which had originally come from cardholder 112. Clearing and administration system 110 then transfers a lump sum to acquirer 114 using a suitable settlement service (such as one provided by Visa International) to pay the various service providers having a relationship with acquirer 114. Based upon the previous collection data, acquirer 114 then transfers an appropriate amount of money to each service provider 104 reflecting the value of the goods and/or services that that service provider had provided that day to cardholders based upon deductions from their stored-value cards.
Although such a service payment terminal described above is useful for the on-site purchase of goods by a consumer with a smart card, it does not permit the purchase of goods and/or services by a customer over a network. Nor does such a terminal permit the immediate transfer of electronic information to a consumer's computer. Service payment terminals are typically specially-designed units of hardware and software located at a merchant site. Furthermore, the service payment terminal is designed to integrate into one hardware location the functions of the terminal application (providing goods and/or services), a card handler for the stored-value card, and the transaction management embodied in the security card. Such a design is not suitable for transactions where a customer may wish to perform a transaction from almost any location (including the home or office) quickly and easily with a minimum of prearranged set-up and expense. Furthermore, although various Internet payment schemes have been suggested, they are not oriented toward small value transactions, and do not allow the use of a smart card for transactions over the Internet.
Thus, it would be desirable to have an architecture and system that would allow a consumer to quickly and easily perform transactions over an open network such as the Internet using a smart card. It is also desirable to have an architecture and system in which a user may use a smart card for both purchases over the Internet as well as purchases at existing service payment terminals.